The top financial regulator in Massachusetts has subpoenaed 15 brokers as part of a new investigation into complicated financial investments being sold to older people.
The Massachusetts Secretary of the Commonwealth, William F. Galvin, asked the brokers, including Merrill Lynch and LPL Financial, about the way they have marketed “high-risk, esoteric products†to older citizens.
Several regulators have previously expressed concern about the rising number of opaque products that have been marketed to unsophisticated investors looking for higher returns in an era of low interest rates.
“While these products are not unsuitable in and of themselves, they are accidents waiting to happen when they are sold to inexperienced investors by untrained agents who push the products to score the large commissions associated with alternative investments,†Mr. Galvin said in a statement.
Mr. Galvin recently collected $11 million in fines from five broker dealers for selling illiquid real estate investment trusts, or REITs, to investors in his state. Unlike publicly traded REITs, the illiquid products are not easy to sell when a consumer wants to get out of the investment.
Mr. Galvin’s office emphasized that the investigation was just beginning. He added that being on the list of banks and brokerages receiving subpoenas “is not an indication of wrongdoing at this time.â€
